(XLF) Stock Market News for September 28, 2011 – Market News

Optimism about a possible resolution to the Greek-debt crisis provided a much needed boost to the markets, which logged their third-straight day of gains. But sell-offs in the final hours sparked by media reports of a split in euro-zone curbed the gains partially. However, the final hour slip was not sufficient to prevent a three-digit gain for the Dow and the S&P 500’s biggest three-day percentage gain since mid-August.

The Dow Jones Industrial Average (DJIA) gained 146 points or 1.3% to finish the day at 11,190.69. With all of the 10 industrial groups gaining in the Standard & Poor 500, the index ended at 1,175.38, gaining 1.1%. The S&P 500 has now risen by more than 4% since the closing bell on Thursday and this is the index’ biggest three-day percentage gain since mid-August. The Nasdaq Composite Index was up 1.2% to settle at 2,546.83. The fear-gauge CBOE Volatility Index (VIX) dropped below 38. A busy day for the Street saw consolidated volumes on the New York Stock Exchange, Amex and Nasdaq jumping to 9.04 billion shares, considerably higher than last year’s daily average of 8.47 billion.

Over the weekend, European ministers had assured global finance leaders in Washington that they would take more aggressive decisions to fight the debt crisis. A proposed “special purpose vehicle” will boost the flagging European economy. This vehicle plans to issue bonds to investors and utilize the proceeds to purchase sovereign debt of troubled European nations. The plan aims to allay the concerns of troubled nations and also European banks, as the “special purpose vehicle” will seek a loan from the European Central Bank using the issued bonds. Through this plan, banks will exchange sovereign debt for European Investment Bank issued bonds. The European Investment bank is owned by the member states of the European Union. Additionally, euro-zone members continue to back an expansion of the European Financial Stability Facility (EFSF). This is a bailout fund that aims at boosting troubled nations like Greece, Ireland, Portugal, Spain and also Italy.

However, optimism from these developments faded somewhat and dragged the US indices down from their session highs after the Financial Times reported that a divergence in opinion had emerged among euro-zone members. The blue-chip index did manage a three-digit gain, but it dropped almost 180 points from its session high. According to the Financial Times report, a senior European official said that of the 17 members of the bloc, seven members want private creditors to take up a larger writedown on Greek bond holdings. It is also estimated that Athens needs a larger bailout package than what was projected a couple of months ago.

European debt concerns have looked to threaten the US indices as well as the global economy markets. Apart from the Euro debt fears, the US Federal Reserve had said that “…there are significant downside risks to the economic outlook, including strains in global financial markets”. This had sparked a heavy sell-off last week. Domestic economic reports also failed on to lift the mood on most occasions.

However, data on home prices released yesterday provided much needed optimism with gains continuing into the fourth-straight month. According to the Standard & Poor’s/Case-Shiller home price index, “Data through July 2011 for both the 10- and 20-City Composites increased 0.9% in July over June. David M. Blitzer, Chairman of the Index Committee at S&P Indices said: “With July’s data we are seeing not only anticipated monthly increases, but some fairly broad improvement in the annual rates of change in home prices.” “This is still a seasonal period of stronger demand for houses, so monthly price increases are expected and were seen in 17 of 20 cities. The exceptions were Las Vegas and Phoenix where prices fell, while Denver was flat. The better news is that 14 of 20 cities and both Composites saw their annual rates of change improve in July,” he added.

Meanwhile, the Conference Board reported that consumer confidence had remained almost flat in September. According to the report: “The Conference Board Consumer Confidence Index, which had declined sharply in August, remained essentially unchanged in September. The Index now stands at 45.4 (1985=100), up slightly from 45.2 in August. The Present Situation Index decreased to 32.5 from 34.3. The Expectations Index edged up to 54.0 from 52.4 last month”. This was however slightly better than the consensus for the current period which projected the reading at 45.2.

Peeking into the performance of the sectors, the financial sector has responded on most occasions to European and domestic economic developments. Yesterday, the Financial Select Sector SPDR (XLF) fund trimmed some of its gains in the late hours and ended with a 0.5% increase. Among the bellwethers, The Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup, Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC) and Barclays PLC (NYSE:BCS) gained 0.4%, 2.5%, 1.0%, 0.7% and 3.3%, respectively. However, JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corporation (NYSE:BAC) declined by 0.3% and 1.8%, respectively.

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